New Job, New Mustachian, New Start? Looking for advice.

[ldhagen]

Hey there,

I am a new Mustachian although I have been very interested in money from a young age. I am starting a new job in two weeks after almost a year of being unemployed. I am also in a newish stable relationship. I'd like to make some wise choices and start with a good foundation moving forward. I'd appreciate any thoughts and advice that more experienced Mustachians can give to me. I've given a lot of detail (hopefully not too much) but if you have questions, please let me know.

Relevant information:

Located in Canada
New job will pay between $55K-$60K annually (currently negotiating for an increase, $55K is what the current offer is)
After federal and provincial tax, plus CPP & EI deductions, this should result in a take home pay of $1607 every 2 weeks.
There will be a benefits package that I need to pay into - I don't know what the deduction will be for this
In one year's time I will be eligible for the company pension plan

New job is a 45 minute commute away. Partner works 8 minutes away from that so we will look into commuting together. She is in an 8 month lease; I currently pay $500/mth in rent including all utilities. Homes within walking distance of our jobs are between $500,000 and $1,000,000. (Location - South end of Guelph and Aberfoyle, ON). We would like to save up for a downpayment; it is likely that we can find something less expensive further away. Small is better.

Current Assets: Overall $46,000 in cash and cash substitutes. $29K is locked in RRSPs.
Current Expenses: Car loan at $14,114.86 at 5.99% interest rate, plus monthly expenses at $1040. No house.

My partner and I have not combined finances and live separately. She is paid slightly above minimum wage. We will likely be moving in together at the end of the 8 month lease.

Full details:

CIBC
Checking account: $500
RSP: CIBC Balanced Fund $8035.20
RRSP: CIBC U.S. Index Fund $1,877.32

MER of 2% plus 1% trailing fee for Balanced fund; unknown for the US Index fund

Tangerine:
RRSP: Tangerine Balanced Growth Portfolio $11,973.80
TFSA: Tangerine 0.8% interest rate $1,674.55
Emergency fund: Tangerine 0.8% interest rate $4079

MER 1.07% for Trangerine Balanced Growth portfolio

Scotia iTrade:
Stocks, Proctor & Gamble - $1700 USD - charges $25 inactivity fee every 3 months; have a capital loss for this year due to selling blackberry stocks for -1,324.21 CAD

Assante:
RRSP: $16045.20
Don't know what the MER is

Overall current assets: ~ $46,000 of which $29,296 is tied up in RRSPs.

Current Expenses:
Car loan payment: $131.70
Car insurance: (this will increase as I'm going from 0km commute to 35km each way) $92.13
Rent: $500
Netflix: $7.99
Cell Phone - WIND: $55.00
Groceries - unsure, about $75 per week
Eating out - ~$35 per week
Monthly bank fee - $14.95
Roller derby fee: $45
Miscellaneous: $60

Overall current expenses (monthly):  $1040

Zero credit card debt
Outstanding balance on car loan (2012 Ford Fiesta, bought used): $14,114.86 at 5.99% interest rate

MER on CIBC Balanced fund is 2% plus a 1% trailing fee? I also automatically purchase $25 every two weeks. Am I being stupid?

Rates of return for US index: 3 months -1.4, 6 months -3.8 1 year 6.0. If the US market is doing so well, why is my indexed return doing so poorly? Also, I honestly can not figure out what kind of fees I am paying for this account. It's page 107 of this simplified prospectus.. https://www.cibc.com/ca/pdf/mutual-funds/cibc-sp-en.pdf

I could really use any advice that more experienced Mustachians can give. At this point it seems clear that I should transfer some of the funds I have into paying down the car loan, but I'm not sure which ones I should cash out. Also, it seems apparent that I am paying too much in fees but I don't know what I should clear out and where I should move my funds to. I've heard VanGuard is good but I don't think another fund on top of the ones I already have is the right plan... please, if there is any advice you can give me, I'd highly appreciate it.

[pyyj]

In terms of deploying your assets, you are correct that disposing of the car loan immediately is your easiest immediate win: 6% guaranteed return! You aren't beating that with any of your investments, so move the cash out of savings and onto that debt.

I recently consolidated all my investments from a multitude of different funds into a single set of accounts (RRSP, TFSA, Taxable) at QTrade. The Globe has ranked them at the top or near the top of Canadian online brokerages for many years running, and they've been fine in my experience. Moving the funds turned out to be quite easy once I discovered the Magic Form https://www.qtrade.ca/_pdfs/forms/en/qi/Transfer_Investment.pdf, which you just fill out with the account details and send in the QTrade.

All that to say: yes, you're getting screwed on that 2% MER, move the funds into a brokerage account and buy a low-free ETF, including potentially ones from Vanguard that trade in Canada. https://www.vanguardcanada.ca/individual/etfs/etfs.htm

The sooner you get out of high-fee funds and into low-fee ETFs, the better. There is no performance advantage to the high-fee funds, so you're basically just ceding 1-2% of your return to some Bay Street fund manager. Boo!

On a similar note, there has to be a way to get the banking services you need without paying a $15/month fee. Some research is in order!

You've noted that your insurance will probably go up as you commute more: even worse, your gas bill will go up quite precipitately. Looking for a place closer to work seems like an "easy win", given that your SO is working in the same general area too.

Keep looking for ways to improve your salary. One big raise can make all the careful penny pinching and investment maneuvering look like a rounding error on your plans (which is not a reason not to do them, but a reminder of where the big wins lie). That said, a foundation of careful expense controls and efficient investment only serves to magnify the advantage from finding a raise in income.

Good luck!